- Bunds weekly chart has potential to form a double top.
- Price action feels strange. Don't seem to be negatively correlated with other European bonds anymore. Today its BTPs down, Bunds down (wider European bond spreads notwithstanding).
- Dire bund auction (39% retained by Buba). Reports Asian holders no longer keen on buying bunds. Worry EU debt burden to fall on Germany.
- Critical downside chart points confirming trend change = 134.77 and 132.89.
- Significant previous high at 3.34% being taken out now. Bunds are now bearish on all of my 3 time frames.
- This is good for my long UST 10 years/short Bunds spread (but the spread is still at my entry level at +13). Need the US 10 yrs to remain range-bound though. No use for me if it too breaks on upside (yield wise). Guess US10YY has to hold 3.57% for spread to have any hope of paying off.
- Just grit my teeth and sold some outright Jun11 Bunds at 121.25 (after close).
- Plenty more comments from ECB officials mostly affirming expectations of rate rise next week.
- Greece aid package agreement = temporary cooling of debt crisis (still rest of PIGS for markets to pick on).
- Easing of panic evident from 10 year bond yield charts of Germany and Greece.
- EU10YY : Spike bottom at 2.905%. Greece bailout = more funding pressures for core Europe. Sell Bunds. Watch 3.09% (now at 3.00%) - if taken out, bunds could go a lot lower.
- GR10YY : Spike top at 13.14% (now 9.33%).
- Prefer to pair Selling Bunds with shorting EUR/USD. Good news for Greece = lower bunds and relief rally (reckon already half done) for EUR/USD. Any hiccup = EUR/USD takes a hit but Bunds will not necessarily rally a lot given the anticapated funding demands/credit pressures (barring an ejection of Greece from the EU).
- As explained in yesterday's post, shorting Bunds makes sense for the core book (insurance for large short EUR/USD position in case of positive development on Greece/EU).
- Established initial short today at 124.55 in Jun10 Bunds, as planned.
- No plan to increase short Bunds until signs of a turn or if we get really close to 2.85%.
- Core book is short EUR vs "everything" (namely CAD, Gold, USD). Concentration risk is high, but trends are strong so I do not wish to reduce current positions.
- But even strong trending markets will see retracements when positions are stretched, and these often get triggered on the flimsiest of excuses when the timing is ripe. Need to protect myself against backlash from these almost sure-to-happen setbacks.
- Of the view here that Bunds are "tainted" by Greece bailout in the longer term.
- Near term, bunds are supported by spread activity, weak growth and absence of inflation, and carry trades driven by accepted low likelihood of ECB tightening.
- Chart-wise : EU10YY at 3.05% now. Historical low at 2.856%. Planning to go short Bunds against the 2.856% stop loss, if (and only if) market gives me a good entry point. Will be very very patient about this. [This is Take 2. Take 1 was stopped out on GS/SEC].
- In event of a snap-back rally in EUR/USD following a relaxation of Greece contagion fears (however temporary), the short bunds position should help set-off partially the negative FX P&L.
- Intention : EUR FX = Core. Bunds = "Trading" Hedge. Usual rule about not getting involved in non-trending markets/charts does not apply here.
- The initial tiny short Jun10 Bunds (at 122.99) is now doubled.
- Average in-rate is 123.21.
- On weekly, presumed trapped between bold pink and purple lines. This is lower end of yield range so buy yield/sell bunds.
- Hypothesis behind short trade is : Bunds tainted by Greece bailout.
- Still looking for higher prices to add on.
Looks like the long awaited break of 3.093% is finally here. Last at 3.064% = 1 year low yield.- Downside objectives from charts @ 3.00% and 2.85%. A break of the latter (=20 year, if not all time low) would be very significant.
- Long Jun10 bunds position stepped up to max now. Average in-rate 123.04 after a month of dithering about. (Long since 25Feb10, waiting for this).
- Addendum 7:09 am 23Mar10 : Yesterday's HLC = 3.122%, 3.06%, 3.072%. So daily buy (bunds) signal confirmed.
Last dabbled in this spread in Nov09 last year around the +11 to +35 region. Since then taken my eye off the ball and missed a nice 50 bp move.- Not too late to get involved however. Monthly uptrend is firmly underway.
- US10YY : Weekly coiling up into a tighter and tighter triangle. Boundaries at 3.75% and 3.63% (current 3.70%). Mind the break!
- EU10YY : Very top heavy.
- Strategy : Initial outright long Bunds already on board. Add long on EU10YY break of 3.09%. Sell UST against this only if we break out of the US10YY triangle on the upside. Put on the spread trade itself directly only if we get a pullback to the low +50s (now at +58). If not, just leave the spread alone. If US10YY do not break out of the triangle, just go with outright Bunds.
- Addendum 4:40 pm 22Mar10 : Added to Bunds @ 3.09% (low today 3.084%, a fresh low for this move). Do more tonight if we can close < 3.093%.
- EU10YY been hovering around 3.10%-3.15% for past few days. We did touch a low of 3.091% briefly just once.
- A close below 3.09% would be the lowest close in a year. The last time we closed below that level was the week of 22Mar09.
- Ready to turbo-charge my risk level here any day now. Buy Bunds on a close below 3.09%.
Added to long Jun10 Bunds at 123.10 tonight on trade to new contract high.- Watching the critical 3.09% EU10YY closely to see if we break this soon.
As per soybean, have gone long Jun10 Bunds @ 122.83 (=appx 3.113%) in a single lot to heighten sensitivity to price movements here. This is a trade with good potential that I do not want to miss.- Weekly : Pink yield support line at 3.12% = just marginally being broken today.
- The buy signal I am waiting for is a closing break < 3.09%.
- Reminder post.
- Pink support line on weekly touched today at 3.125%. Bounced off to 3.15% now.
- A more important level nearby at 3.09%.
- Buy Bunds if we break 3.09%.
10 year Bund yields @ 3.117% now = low of current move (presumably Bunds/PIIGS-spreads driven).- Monthly : Large triangle evident. Yield support at 3.09% which is also a significant previous low.
- Weekly : Already broken out of triangle on downside. However, I will wait to see 3.09% taken out before going long FGBLH0.
- Price action here consistent with more EU country deficits/debt burden woes ie expect more downside on EUR/fx as well.
- Unfortunately, my Reuters database for EU10YY doesn't go back further than 1998. From the database available, I see historical low EU10YY at 2.85%. If the triangle works, it's going to take EU10YY way below ie new historical lows in EU yields (which always excites trend traders like me). This could well turn out to be a biggie trade yet. Watch this space!
- Important to wait for 3.09% confirmed break before buying! Or else could risk buying Bunds at the absolute highs now.
Addendum : Managed to pull out a chart of 10 year German bund yields going back to 1990. Confirm 2.85% is the low since then. Thus, break of 2.85% = new 20 year low at a minimum (if not all time low). Exciting if it comes to pass.
